Midterm Question 2

Which of the following is an example of a liability?

(a) A mortgage.
(b) A note payable to the city water department for $1,500.
(c) A table saw.
(d) A $1,000 deposit in a savings account.
(e) None of the above.

Answer: (a) & (b)

(a) A mortgage is a liability because it is money that the company owes.

(b) Notes Payable: a liability that is like an accounts payable bill, but stretched over a typically longer period of time.

(c) A table saw is not a liability (in this context) and would be better categorized as an asset or part of inventory.

(d) A deposit into a savings account is not a liability, because it is not money that the company owes.

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License